The Tax Publishers2020 TaxPub(DT) 2657 (Del-Trib)

INCOME TAX ACT, 1961

Section 92B

There was a direct nexus between AMP expenditure and business of assessee since assessee had to incur such expenditure to meet competition in Indian market for selling its products in India because unless the assessee made its products known to the market, its business would suffer, accordingly, incurrence of AMP expenses could not be treated as international transaction for benefit of AE in the form of brand building exercise

Transfer pricing - International transaction - AMP expenses alleged as brand building exercise for benefit of AE -

Assessee claimed deduction of advertisement, marketing and promotion (AMP) expenses incurred by it. AO treated the expenses as excessive and incurred for the brand owned by AE abroad and further being of capital in nature. Accordingly AO computed addition on account of adjustment of AMP expenses under section 92CA(3). Held: There was a direct nexus between AMP expenditure and business of assessee since assessee had to incur such expenditure to meet competition in Indian market for selling its products in India because unless the assessee made its products known to he market, its business would suffer. Further, AMP expenditure incurred by assessee was revenue in nature since no permanent character or advantage was achieved via the same and such expenses for advertising consumer products generally were a part of the process of profit earning and not in the nature of capital outlay. Accordingly, addition could not be sustained.

Supported by: CIT-II v. Jubilant Foodwork (P) Ltd. 2014 TaxPub(DT) 3684 (Del-HC), CIT v. Monto Motors Ltd. [ITA No. 978/2011, Order, dated 12-12-2011] : 2012 TaxPub(DT) 1074 (Del-HC) and CIT v. Salora International Limited (2009) 308 ITR 199 (Del) : 2009 TaxPub(DT) 751 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08

INCOME TAX ACT, 1961

Section 92C

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